Economic Overview: Ecuador has substantial petroleum resources,
which have accounted for 40% of the country's export earnings
and one-fourth of public sector revenues in recent years.
Consequently, fluctuations in world market prices can
have a substantial domestic impact. In the late 1990s,
Ecuador suffered its worst economic crisis, with natural
disasters and sharp declines in world petroleum prices
driving Ecuador's economy into free fall in 1999. Real
GDP contracted by more than 6%, with poverty worsening
significantly. The banking system also collapsed, and
Ecuador defaulted on its external debt later that year.
The currency depreciated by some 70% in 1999, and, on
the brink of hyperinflation, the MAHAUD government announced
it would dollarize the economy. A coup, however, ousted
MAHAUD from office in January 2000, and after a short-lived
junta failed to garner military support, Vice President
Gustavo NOBOA took over the presidency. In March 2000,
Congress approved a series of structural reforms that
also provided the framework for the adoption of the US
dollar as legal tender. Dollarization stabilized the economy,
and growth returned to its pre-crisis levels in the years
that followed. Under the administration of Lucio GUTIERREZ,
who took office in January 2003, Ecuador benefited from
higher world petroleum prices, but the government has
made little progress on fiscal reforms and reforms of
state-owned enterprises necessary to reduce Ecuador's
vulnerability to petroleum price swings and financial
crises.

International
Disputes:
the continuing civil disorder in Colombia has created
a serious refugee crisis in neighboring states, especially
Ecuador.